Real estate is a great way to create wealth. Here are several ways in which you can invest in real estate.
1. Direct Ownership
Traditionally, direct ownership has been the main way investors acquire real estate. This involves sourcing and evaluating the opportunity, keeping in mind the type of property you are investing in. While this method is best suited for individuals who can dedicate a large amount of capital, it offers a high level of asset control and low fees to investors.
Pros: High control over assets, lower fees.
Cons: Substantial capital up-front and working capital to cover unoccupied months
2. Real Estate Investment Trust (REITs)
A real estate investment trust is a company that owns and operates income-generating assets. REITs make money by leasing or selling the properties they own. A huge sum of money is invested from thousands of investors and professional managers decide how to invest it. Buying REITs is like a mutual fund for real estate – your returns are based on how the company performs.
Pros: Your investment isn’t associated with just a specific property.
Cons: Just like stocks, your investment is dependent on market conditions.
3. Real Estate Crowdfunding
Real estate crowdfunding is a way of investing where a pool of individuals contribute a small amount of capital towards a specific real estate deal. As an investor, you can either invest your funds through equity or debt. The major highlight of crowdfunding is that it allows small investors to participate in high-value real estate projects.
Pros: Access to high income-generating projects with a low minimum investment amount.
Cons: Highly illiquid.
4. Rent Out a Spare Bedroom
You don’t always have to own a second home to become a landlord. If you have a spare bedroom in your home and you are open to sharing it, this strategy is the best way to generate income. Although sharing a bedroom may seem like a drastic measure, it has been a common way for homeowners to make ends meet.
Pros: Generate income without much investment.
Cons: Loss of privacy and control over personal space.